I - Public Procurement in the EC services: how do we work

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1 I - Public Procurement in the EC services: how do we workREGIONAL CONFERENCE ON PUBLIC PROCUREMENT REFORM IN WEST BALKAN -KEY CHALLENGES AND PRIORITIES FOR CHANGE- Pristina, 16 – 17 September 2008 Grand Hotel, Conference RoomI - Public Procurement in the EC services: how do we workII - Public Procurement in the EU:recent developmentsPresented by: Olivier MoreauSeconded national expert in the European CommissionDirectorate General Internal Market & ServicesUnit C1: Economic and international dimension of procurement; E-procurement

2 DG Internal Market and ServicesDirector General Jörgen HolmquistAssistants Michael Hager Sven GentnerInternal Audit CapabilityNathalie StefanowiczDeputy Director General Thierry StollDeputy Director General (vacant)Principal Advisor J-C Thébault (detached to the President’s Cabinet)Dir A Planning,Administrative Support and Communication Henk PostDir B Horizontal PolicyDevelopmentJacqueline MinorAdviser: Hakan AnderDir C Public Procurement PolicyBertrand CarsinDir D Knowledge-based EconomyMargot FroehlingerDir E ServicesGuido BerardisDir F Free movement ofCapital, Company Law and CorporateGovernancePierre DelsauxAdviser: Piotr MadziarDir G Financial servicesPolicy andFinancial MarketsDavid WrightDir H Financial InstitutionsElemer TertakA1Human and Financial ResourcesOlivier SallesDeputy: Jan SempelsB1 Policy Developmentand Coordinationof the Internal MarktBernhard FriessDeputy: Nathalie BergerC1 Economic and Interna-tional Dimension ofPublic Procurement;E-Procurement Erik Nooteboom Deputy: Christian ServenayD1Copyright and Knowledge-based EconomyTilman LuederE1 Services IMaria Martin-PratDeputy: Martin FrohnF1 Free movement of Capital andFinancial Integration Francisco Caballero Deputy: Laurence LennanG1Financial services PolicyJean-Yves MuylleH1 Banking and FinancialConglomeratesPatrick PearsonDeputy : Arvind WadheraA2Planning andInternal ControlMatthew KingB2 Impact assessment, Evaluation andEconomic AnalysisWerner StenggC2Formulation and Enforcement* of Public Procurement Law I Matthias Petschke Deputy: Gauthier PierensD2 Industrial PropertyMirjam Söderholm(acting)E2 Services IIJean Bergevin Deputy:Salvatore D’AcuntoF2 Company Law, Corpo-Rate Governance andFinancial Crime Claire BuryDeputy: Philippe PelléG2 Financial Markets InfrastructureMario NavaH2 Insurance and PensionsKarel Van HulleThe European Commission as a whole is « the Guardian of the Treaty »: Article 211In order to ensure the proper functioning and development of the common market, the Commission shall:— ensure that the provisions of this Treaty and the measures taken by the institutions pursuant thereto are applied (…)DG MARKT in charge of different issues relevant to of building and maintaining the opening up of the Internal Market (such as banks, insurances, services, intellectual and industrial property rights, etc…And esp. of the right implementation of Community law in the field of PPWhy is PP important?It is all the more important when procurement is financed through Community funds, because it is the money of the taxpayers coming from the 27 MS which is at stakeAbout Infringement procedures:Article 226If the Commission considers that a Member State has failed to fulfil an obligation under this Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations.If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice.A3Information Techno-Logy and Documenthandling Fernando ToledanoDeputy: SantiagoVazquez SoutoB3 Better Regulation Cycle:Legal aspectsHenrik MørchC3 Formulation and Enforcement** of PublicProcurement Law I I Ugo Bassi Deputy: Klaus WiednerD3 Regulated ProfessionsPamela Brumter Deputy: Jean-Marie ViséeE3 AdministrativeCooperation andMember State NetworkNicholas LeapmanF3 AccountingJeroen HooijerDeputy : Ulf LinderG3 Securities MarketsMaria Velentza (acting)H3Retail issues, ConsumerPolicy andPayment SystemsEric Ducoulombier (acting)A4 Internal and External CommunicationPanayotis StamatopoulosB4 External aspects of the Internal Market Anthony Dempsey Deputy: BirgitWeise-MontagE4Postal ServicesJörg ReinbotheF4AuditingJürgen TiedjeG4 Asset ManagementNiall BohanDeputy: Didier Millerot* For BE, CY, FR, EL,HU, IE, LU, LT, LV, NL,PT, PL,ES,UK** For AT, CZ, DK, EE,FI, DE, IT, MT, SE, SK, SI

3 Our working methods General aspects of assessmentWhat is at stake?A well functioning, complete and sound procurement systemOur contribution?- Providing explanations, recommendations and legal assistance to the national administrationOur working methods for the assessment of legislative approximation and institutional reform in the area of public procurementOur aim is the creation of a well-functioning, complete and sound public procurement system, so apart from the legal and legislative aspects we provide comments and recommendations on administrative capacity building, institutional questions, control mechanisms, etc. We consider the public procurement system as an essential part of the reform of public spending.Our assistance is based on providing explanations, recommendations and legal assistance to the national administration.

4 Our working methods General aspects of assessment (II)Incorporation of the relevant procurement rules:the basic principles of the EC Treatythe relevant EC Directivesthe relevant case-law of the ECJthe “soft law” of the EC on the acquisConsistency with the EU-partner country agreement PP provisions (when applicable)When evaluating legal texts or other documents related to the approximation to EU procurement rules, DG MARKT makes an assessment whether the given texts properly incorporate the relevant EU procurement rules. Such rules especially include:- the basic principles of the EC Treaty e.g. free movement of goods, the right of establishment, freedom to provide services, non-discrimination, equal treatment, transparency, proportionality, mutual recognition;- the relevant EC directives coordinating the procedures for the award of contracts (2004/17/EC, 2004/18/EC, 89/665/EEC, 92/13/EEC, 2007/66/EC);- the relevant case law of the European Court of Justice;- the "soft law" of the European Commission interpreting the relevant rules of the EU procurement acquis.In case there is an international agreement between the EC and the partner country, the Commission takes into account the specific, public procurement related provisions of that agreement.

5 Our working methods General aspects of assessment (III)All kind of procedure: to comply with the TreatyAbove the thresholds: according to the rules describes in the PP DirectivesBelow the thresholds: proper solutions compliant to the relevant principlesLevel of requirement according to the status of the partner countryProgress assessed within the whole spectrum of legal textsFor institutional building, according to experience, in the absence of precise requirements in the acquis.During the evaluation of texts MARKT experts take especially into account the following:- all contract award procedures (irrespective of their value, type or any other feature) shall respect the principles of the EC Treaty (they shall be transparent, non-discriminatory and treat economic operators on an equal basis);[Commission Interpretative Communication 2006/C 179/2 ]- contracts above the thresholds stipulated in the EC procurement directives shall be awarded according to the rules described in them. Those phases or elements of the award procedure which are not regulated in the directives (e.g. decision making procedures of the award committee) shall comply with the principles of the EC Treaty (see above);According to Article 249 of the EC Treaty "a directive shall be binding, as to the result to be achieved, upon each member State to which it is addressed, but shall leave to the national authorities the choice of form and methods". On the basis of this, the Commission does not require the verbatim translation of the procurement legislation (although in some cases it can be the most appropriate solution) and does not intervene into the chosen level or form of legal approximation. On the other hand, MARKT meticulously checks whether the national legislation properly implements the principles and procedures and whether it is capable to attain the goals of the directives- since the EC Directives do not cover every aspect of contract award procedures (contracts under the EC thresholds, award decision, etc.) it is up to the national administration to find proper solutions and methods to address these issues which are compliant to the relevant principles- regarding partner countries which undertake legislative approximation, the Commission's approach is more flexible than towards Member States or candidate countries that have to transpose the relevant EU rules- the Commission evaluates the progress achieved on the whole spectrum of legislation, including primary and secondary level legislation as well as "soft law": guidelines, manuals, etc.- Creating the adequate institutional background is essential for a properly functioning public procurement system and experience gained from previous enlargements has proved that national legislation aligned with the acquis can only be implemented if the authorities concerned are up to this task. In the absence of detailed rules on the institutional background in the acquis DG MARKT examines the level of development on a practical basis (scope of authority, the quality of the drafted legislation, number of staff, experience of staff, etc.) drawn from our experience from previous enlargements.

6 Our working methods Sequencing of the informal assessment of draft legislation- Meeting the consultant to discuss the planned legislation with special regard to its relevance to legal approximation- Prepare a draft text to be discussed with the consultant- redraft it according to the consultant's eventual comments- re-discuss it with the consultant- submit the "final" draft to the Commission for comments- discuss the text with the consultant in the light of the Commission's comments and redraft it (if necessary).Practicalities of the informal assessment of draft legislationThe Commission services can assess draft legal documents in an informal fashion.The Commission services are ready to discuss any kind of draft legislation (primary or secondary, practical guides, manuals, etc.) at any stage of the adoption procedure, but practice in the past has shown that the most efficient method is to submit to the Commission those texts in terms of which all the necessary internal political decisions has been taken by the line ministry (or ministries) and the draft is ready to be sent to the government. At that stage the Commission can already have a clear and complete picture on the whole concept of the law and on the other hand our eventual comments can easily be taken into account and the text can be modified if necessary.Another consultation with the Commission before the adoption of the text (which might be substantially amended by legislative proposals by MPs) would be appreciated.Partner countries usually have access to technical assistance facilities funded by the EU (e.g. OECD/Sigma, TAIEX, twinnings). The Commission services prefer to receive draft legal texts which have already been properly discussed with the technical assistance consultants. This first "advisory phase" helps to avoid the most obvious mistakes and to better understand how national legislation can be approximated to the acquis.Nota bene: the consultants as well as the Commission services can help the drafting and can share their views and experiences with the national administration, but cannot take the responsibility of taking decisions on the form and content of the draft text. Ownership of the text and responsibility for its content remains entirely in the hands of the national legislators (administration drafting the text and Parliament enacting it).Having a proper feedback enormously helps our work, so any information on the acceptance or disregard of our (or the consultants) comments (or parts of it) would be appreciated.So here is described the sequencing which is usually the most efficient:Commission experts are ready to meet government experts from line ministries to discuss certain questions or problems of approximation concerning concrete, large scale legislative amendments i.e. the planned adoption of a new public procurement law, at any stage of the procedure. These meetings usually take place in Brussels and take one day. For the sake of efficiency the documents to be discussed should be sent to the Commission in due time.We can even help the national administration in defending the text in Parliament.The Commission does not have a formalized procedure for the assessment of draft legislation.It is sufficient if we receive the draft text by than the desk officer in charge reads the text and analyses it according to the relevant EU procurement rules described hereinabove.Usually we make two types of comments: general ones, referring to problems which appear regularly in the draft or which have substantial importance with regard to approximation; and specific ones, usually inserted in the relevant part of the text, noting a problem related to the given article or paragraph.The time limit that we need for the assessment depends on the length of the text as well as on our other workload. In any case, we try not to delay the procedures. Following the assessment we simply send back the commented version of the draft text to the sender by .We are ready to further comment the text once it has been redrafted.

7 Recent and future evolution- some new legislative initiatives,- several non binding documents,- many studies and documents for reflection.

8 The Review of the Remedies DirectivesExisting Directives on Remedies89/665/EEC and 92/13/EEC- Pre-contractual remedies- Post-contractual remediesWHAT CONTRACTS ARE COVERED BY SUCH REMEDIES?According to the rulings of the Court of Justice the Member States should ensure that effective and rapid remedies are available against decisions taken by contracting authorities and contracting entities as to whether a particular contract falls within the personal and material scope of Directives 2004/18/EC and 2004/17/ECPrinciple of equivalence and jurisdictional protection (see C-92/00 krankenhaustechnik)COMMON FEATURES IN BOTH REMEDIES DIRECTIVES:- Interest to act- Prior information as an option.- One common remedy in the two Directives: award damages to persons harmed by an infringement.1st Effective remedy in the public sector and as an option in the utilities sector: interim measures in interlocutory procedures, e.g. suspension of the procedure for the award of the contract ; injunction to communicate documents, injunction to re-tender or to amend certain conditions in the tender documents.2nd effective remedy in the public sector and as an option in the utilities sector: setting aside of unlawful decisions including the removal of discriminatory specifications in the tender documents.Slide - 8

9 The Review of the Remedies DirectivesNew Directive on Remedies2007/66/ECafter the conclusion of a contract, the powers may be limited to awarding damages. Even when it is not the case in practice the Courts are reluctant to set aside decisions when the contract is concludedImproving the effectiveness of pre-contractual Remedies in formal award proceduresProviding for effective Remedies against the practice of illegal direct award of public contractsWHAT IS THE IMPACT OF THE “ALCATEL” CASELAW ?THE TRADITIONAL SITUATION :- BEFORE THE CONCLUSION OF THE CONTRACT, THE PERSONS HARMED BY AN ADMINISTRATIVE DECISION MAY CONTEST IT(IN THEORY) BUT IN PRACTICE THEY OFTEN DO NOT KNOW THIS DECISION.- AFTER THE CONCLUSION OF THE CONTRACT, THEY ARE INFORMED BUT THEY CANNOT CONTEST IT ANYMORESINCE THE CONTRACT HAS ENTERED INTO FORCE.BEFORE IS TOO SOON. AFTER IS TOO LATE.

10 The Review of the Remedies DirectivesDirective 2007/66/EC - Key elements of the reviewIntroduction of a standstill period between the award and the conclusion of a public contractCombat against illegal direct awards of public contractsSlide - 10

11 The Review of the Remedies DirectivesI. Standstill periodAllows for effective pre-contractual remediesCommunication of both award decision and reasonsWaiting period of 10 calendar days as a minimumAutomatic suspension in case of application for reviewTHE ALCATEL CASELAW (C-81/98)“(…) THE MEMBER STATES ARE REQUIRED TO ENSURE THAT THE CONTRACTING AUTHORITY’S DECISION PRIOR TO THE CONCLUSION OF THE CONTRACT (…) IS IN ALL CASES OPEN TO REVIEW IN A PROCEDURE WHEREBY AN APPLICANT MAY HAVE THAT DECISION SET ASIDE IF THE RELEVANT CONDITIONS ARE MET,NOTWITHSTANDING THE POSSIBILITY, ONCE THE CONTRACT HASBEEN CONCLUDED, OF OBTAINING AN AWARD OF DAMAGES.”THEREFORE, A REASONABLE TIME-PERIOD MUST BE INTRODUCED BETWEEN THE DECISION BY WHICH A CONTRACTOR IS CHOSEN(DECISION WHICH CAN BE DECLARED VOID), AND THE CONCLUSION OF THE CONTRACT.Slide - 11

12 The Review of the Remedies DirectivesSanctions in case of violation of standstillineffectiveness of the contractalternative penalties, such as finesSlide - 12

13 The Review of the Remedies DirectivesII. Illegal direct awardsPost-contractual remedies available (ineffectiveness)Application within time limits (30 days or 6 months)Slide - 13

14 The Review of the Remedies DirectivesSanctions in case of illegal direct awardsineffectiveness of the contractalternative penalties, such as finesSlide - 14

15 The Review of the Remedies DirectivesState of play legislative processPublication of Directive 2007/66/EC on 20 December 2007Implementation by Member States within 24 monthsSlide - 15

18 Adoption of non binding documentsCommission Interpretative Communication C(2007)6661on the application of Community law on Public Procurement and Concessions to Institutionalised Public-Private Partnerships (IPPP)- Addressing the creation and operation of IPPPs/ »in-house »- Political decision is necessary from the Commissioner and the College to go further through a legislative initiative on concessions- Key issues are:Definition of concessionScope of a possible initiative on concessionsQualification of mixed concessionsThresholds and method of calculationProcedure to award concessionsSelection and award criteriaDuration of concessionsAmendments to the concession during its lifetimeRemedies regarding infringements to the EU rulesPPPs and concessions are a current issues of policy makingPPPs cannot be considered as a specific type of public contractA PPP can be either a public contract or a concession, depending on the distribution of risks between the public partner and the private partnerThere might be specific provisions on PPP types of arrangements, but these should only be complementary to the provisions of the national law implementing EU PP Directives and not define specific procurement rulesThe following elements normally characterise PPPs:• The relatively long duration of the relationship, involving cooperation between the public partner and the private partner on different aspects of a planned project.• The method of funding the project, in part from the private sector, sometimes by means of complex arrangements between the various players. Nonetheless, public funds - in some cases rather substantial - may be added to the private funds.• The important role of the economic operator, who participates at different stages in the project (design, completion, implementation, funding). The public partner concentrates primarily on defining the objectives to be attained in terms of public interest, quality of services provided and pricing policy, and it takes responsibility for monitoring compliance with these objectives.• The distribution of risks between the public partner and the private partner, to whom the risks generally borne by the public sector are transferred. However, a PPP does not necessarily mean that the private partner assumes all the risks, or even the major share of the risks linked to the project. The precise distribution of risk is determined case by case, according to the respective ability of the parties concerned to assess, control and cope with this risk.

19 Adoption of non binding documentsCommission services is preparinga Small Business Act in favour of SMEs.

21 Partners countries responsibilityThey shall:- make their legislation compatible with the Community acquis/or align to the acquis,- prepare guidelines and operational tools,- develop the capacity to manage an efficient and safe system of Public Procurement by setting up a relevant administrative capacity.The Parties recognise the importance of the approximation of Albania's existing legislation to that of the Community and of its effective implementation. Albania shall endeavour to ensure that its existing laws and future legislation will be gradually made compatible with the Community acquis. Albania will ensure that existing and future legislation will be properly implemented and enforced.(Albania-EU SAA, art. 70-1)– Give an organisation for procurement the task of guaranteeing a coherent policy andsteering its implementation.– Present a comprehensive strategy which will include all reforms necessary for legislativealignment and institutional capacity building in order to comply with the acquis.(TR-UE Accession Partnership, Chapter 5: Public procurement)

22 Practical issues encountered in the course of public procurementNo provisions in the Directives regarding implementation of the contractThe legal framework has to be completedin the national law implementing EU lawAnd/or in its secondary legislationAnd/or in the internal rules of the Contracting AuthoritiesIn any case, implementation rules have to comply withthe principles of the Treatythe provision of the Directives, if any

23 For instance…AddendaThe calculation of the estimated value of a public contract shall be based on the total amount payable, net of VAT, as estimated by the contracting authority. This calculation shall take account of the estimated total amount, including any form of option and any renewals of the contract.(Dir 2004/18, art.9-1 §1, PPL art. Art.25-1)Contracting authorities may award public contracts by a negotiated procedure without prior publication of a contract notice in the following cases:(…)As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting authorities when they apply the provisions of Article 7.(Dir 2004/18, art.31-4 b) §2, PPL art.122 j) §6)It is very clear from the wording of those provisions that, notwithstanding the other conditions to be fulfilled in such a case, the main principle here at stake is transparency when awarding the first contract: when reading the contract notice, every potential candidate must be able to estimate what could become the actual final dimension of the contract, in consideration of its possible extension through future addenda.Regarding contractual modifications during implementation of the contract, borders are illustrated esp. by an ECJ case-law: Succhi di Frutta.

24 For instance … (II) Black-listingThe contracting authority has the right to exclude within the award of the public procurement contract procedure any tenderer/candidate if the tenderer/candidate:(…)has been convicted in the last 3 years by definitive court judgement, for an act that doesn’t correspond with the professional ethics or for a grave professional misconduct;(PPL art. 181 d) implementing Dir 2004/ art d)As the areas of monitoring and control of public procurement in Member States are regulated by national law and by obligations under the EC Directives, these functions play a central role in all national public procurement systems. Control in this context does not cover the responsibilities of internal and external audit institutions or of complaints review bodies, but refers only to tasks exercised by central public procurement institutions. Such functions may include the following tasks:Managing of an official list of certified economic operators and/or certified procurement officers;Management of an official blacklist, wherever such lists exist, of economic operators who violated public procurement rules, did not fulfil their contracts, misrepresented information, or offered a bribe.To have such a list, when it does exist, maintained at central level is necessary in view of the principle of transparency , and in order to ensure that black-listing is grounded on objective and fair criteria as well as to preserve the right for the interested economic operators to challenge their black-listing in a review procedure.

25 Purchasers responsibilityPublic Purchasers shall make use of all legal opportunities:- implement national regulations with the aim to get best value for money,- use the allowed flexibility (reduction of deadlines, specific types of procedures,…),- take advantage of the new varied solutions offered (e-procurement facilities).

26 Economic operators roleAll economic operators should contribute to the completion of the Internal Market:- to a fair and sound competition,- to the reduction of public expenditures,- to the quality of public services,- to the improvement of productivity and the development of cross-border trade.

27 EC responsibility What Commission services could do for you?Economic and Financial Assistance: DG ELARGAssistance by DG Internal Market and Services(Unit C1: Economic and International Dimension of Public Procurement Policy; e-procurement):Assistance in the interpretation of the EU procurement legislation,Organisation of bilateral expert meetings,Contribution to seminars and conferences,Support for the elaboration of national strategies,Help in the targeting of external assistance.Public Procurement advisers have a specific role to play:- provide and disseminate a knowledge of legal provisions,- advise on best practices,- provide confidence among operators and institutions.